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Projected corporate fund assessment a concern CUNA
ALEXANDRIA, Va. (11/19/10)--While the National Credit Union Administration’s (NCUA) proposed National Credit Union Share Insurance Fund (NCUSIF) assessment of 0 to 10 basis points “is right within the range” that the Credit Union National Association (CUNA) expected, CUNA President/CEO Bill Cheney said that CUNA is “troubled with the projected corporate stabilization assessment.” The NCUA projected total dual assessments of 20-35 basis points (bp) for 2011. Staff estimated that growing losses at both corporate and natural person credit unions could require an NCUSIF assessment ranging from zero to 10 bp and a Temporary Corporate Credit Union Stabilization Fund assessment of 20-25 bp, bringing the estimated total assessment to 20 to 35 bp. These assessments could collect up to $2.7 billion in funds. NCUA Chairman Debbie Matz noted that the current basis point projection is only an estimate, and could shift due to increases or decreases in the number of credit union failures or CAMEL Code troubled credit unions. However, Cheney said, CUNA is particularly concerned with what appears to be "frontloading" of 20-25 bp. “The whole purpose of the corporate stabilization fund, as enacted by Congress, was to spread the expense to credit unions over an extended period of time. Further, the ‘legacy assets’ resolution plan, unveiled by NCUA in September, had as a central tenet a repayment by credit unions spread over 11 years, divided somewhat equally over that period,” Cheney said. The NCUA proposal, which was released at Thursday’s open board meeting, “almost defeats the purpose of spreading the cost over 11 years,” the CUNA leader added. CUNA has suggested that the NCUA alter its plan by allowing for the pre-payment of assessments over several years. Specifically, Cheney said, the NCUA could still assess 20 to 25 bp to meet liquidity needs, while only charging 9 bp in the following years. “This is a cash flow issue, which can be dealt with by pre-paid assessments as opposed to full assessments charged in one year,” Cheney said. Reporting on the status of its NCUSIF, the NCUA noted that the percentage of total assets held by CAMEL Code 4 and 5 credit unions seems to have leveled off at around 5%. The percentage of assets held by CAMEL Code 3 credit unions also remained somewhat steadily, with a percentage in the high teens (17%). The number of troubled CAMEL Code 4 and 5 and Code 3 credit unions rose by 4 and 5, respectively, between September and October, NCUA staff added.
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